Bank shares take a hit from bad sentiment

With global bourses closing in opposite directions, where European investors are still concerned over the outbreak of the coronavirus, but US investors are making new highs on their exchanges, the Stock Exchange of Thailand (SET) continued to zigzag down on Tuesday.

Beijing is preparing to cut loan rates and implement other measures to help their companies maintain growth during the outbreak. Meanwhile, crude oil prices (WTI) settled back to US$50 per barrel on Tuesday after slipping down to their lowest in more than one year on Monday.

With mixed signals everywhere and the coronavirus death toll still rising, the SET slightly dropped again on Tuesday by 0.41 per cent, with a low trading value of 39.8 billion baht as of 3:45pm. The index traded down by 2.82 per cent year-to-date, with foreign investors as net sellers of 23.495 billion baht, while local individuals are net buyers of 28.706 billion baht.

The good news of the Constitutional Court’s order for a revote of the 2020 fiscal year budget bill’s second and third readings (which are set for February 13 and 17 respectively), is considered to be fast by observers, but has not transpired into green for the Thai stock exchange on Tuesday.

However, the news from the World Health Organization that only 3-5 per cent of the people who have contracted the coronavirus actually need intensive care was also cancelled out by the news that death toll in China has already reached 1,000 on Tuesday.

What went on in global bourses on Monday and the news of the outbreak from abroad still does not explain the fact that most of the shares that were down on Tuesday were bank shares.

INTUCH are still being hit by ADVANC’s worse-than-expected fourth quarter results ahead of the 5G auction, but shares of SCB, TCAP, TMB, BAY, KBANK, BBL, TISCO, KTB, and even KKP were all down at 4:00pm on Tuesday. SCB lost 2.5 baht, down to 98 baht per share, followed by BBL who lost 2 baht, to 146.5 baht per share. This is largely due to the Bank of Thailand (BOT)’s latest decision to regulate three types of fees and charges that financial institutions impose on their customers.

This year, financial institutions are required to adjust early payoff penalties applicable to small and medium-sized enterprises (SMEs) and personal loans, and alter late-payment fees for SME, personal, and mortgage loans based on actual costs. The central banks are also making them eliminate fees for ATMs, debit cards, and changing PINs. All of this means that banks will be making less money from fees they collect from customers.

Asia Wealth Securities said new regulations from the BOT, which will come out in the third quarter of this year, are sending a negative sentiment throughout the banking industry from the expected loss of income. AIRA Securities noted that the changes in regulation, which will affect 200-300 types of banking fees, could lead to the sales of bank shares, which will pull down the index.

SCB’s President, Apiphan Charoenanusorn, said the changes in fees would affect banks but it would not lead to negative income from fees this year. She said her bank’s regulations are already in line with what the BOT will introduce. The only major change for the bank in terms of regulation is the altering of late payment fees for SME and mortgage loans, which the bank will need to reconsider.

Philip Chen Chong Tan, President of Kiatnakin Bank (KKP), said his bank is ready for the changes in fee regulations and he expects that it will not affect his bank’s income from fees, as it is a smaller sized bank. However, the bank would still need time to substitute its system with the new regulations from the BOT.